MDC Partners has big global ambitions.
The holding company announced an affiliate program on Tuesday that will fast track its presence in emerging markets without immediately taking on the risk of an acquisition.
Through the program, the holding company identifies agencies and marketing services companies in the fast-growing markets and service lines—think e-commerce, content creation and social media—and enters into a revenue-sharing agreement with them to service global clients and pitches.
Eventually, if the partnership goes well, these companies become acquisition targets, said Mark Penn, CEO of MDC Partners.
“We’re really in a good position to expand the network in a way that we don't wind up with a huge amount of legacy assets,” he said. “The affiliate program is the first step in an acquisition program.”
So far, MDC has entered into agreements with three agencies: Brand New Galaxy, an e-commerce agency in Europe and the Middle East; Beyond Media Global, a performance marketing agency in North America and East Asia; and OKC.Media, a digital creative agency in Russia.
The program is led by MDC Global president Julia Hammond, who joined in June from Deloitte Digital to help the group attract and service larger, integrated accounts.
“We have these global networks that huge companies like Google, Diageo and Uber turn to for big, global campaign ideas and activations,” she said. “Where we can get stronger as a network is if we're able to find partners that help us resonate and activate locally.”
Affiliates are accessible as central resources across MDC’s network, rather than assigned to a specific agency, so the group can structure teams to fit clients' specific needs and footprints. But eventually, they become acquisition targets for specific agencies within the network. Revenue-share agreements are based on a sliding scale and depend on the affiliate hitting pre-determined KPIs.
While MDC has a presence in 23 countries, it is looking to gain a foothold in fast growing markets where global clients increasingly need service, including Latin and Central America, Africa, Eastern Europe, China and APAC.
There’s no timeline for an acquisition to occur, but Penn said he expects to know whether an affiliate is a good cultural fit within two years. The program aims to identify 50 affiliates by the end of 2021.
The program is part of an aggressive growth plan for MDC, which has been underway since Penn joined as CEO in 2019 after his own marketing services firm, Stagwell Group, invested $100 million in the struggling holding company. MDC and Stagwell are currently waiting for approval for a merger, with a goal to be a $3 billion marketing services company by 2025.
The move toward larger, more integrated work is a shift under Penn’s leadership, and is a response to growing demand from brands for more integrated services from agencies.
“The more complex marketing organizations have become, the more they need a partner that's organized to service to their best interest,” Hammond said. “That goes completely against the siloed mentalities of traditional holding companies. This is about figuring out the real business problem and the opportunities, and building a team to service that.”
The change is a big cultural shift from MDC which, prior to Penn’s arrival had agencies including 72andsunny, Anomaly and Crispin Porter + Bugusky that were known to be fiercely independent and founder-led.
“When I came, frankly, a lot of the teams didn't really know each other,” Penn said. “That is very much the change in atmosphere and culture here.”